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On February 5, 2020, Apple Inc. purchased 12% of Pear Inc.'s common stock for $50,000. Pear's...

On February 5, 2020, Apple Inc. purchased 12% of Pear Inc.s common stock for $50,000. Pears net income for the years ended

On February 5, 2020, Apple Inc. purchased 12% of Pear Inc.'s common stock for $50,000. Pear's net income for the years ended December 31, 2020, and December 31, 2021, were $10,000 and $50,000, respectively. Pear did not pay any dividends in 2020. Pear declared and paid a dividend of $60,000 to all its shareholders in 2021. The fair value of the Pear stock owned by Apple Inc. is valued at $70,000 and $120,000 on December 31, 2020 and December 31, 2021, respectively. How much should Apple Inc. show in the 2021 income statement as income from this investment? $67,200 a. None of these choices is correct. b. $20,000 C. $57,200 d. $60,000 e.
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Answer: d.$57,200

Explanation:

Year 2021
Dividend revenue [$60,000 x 12%] $ 7,200
Fair value adjustment $ 50,000
[$120,000 - $70,000]
Income from investment $ 57,200

Thus, Option d) is correct and remaining given options are incorrect.

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